The Impact of Federal Reserve Chair’s Statements on Bitcoin Price Volatility
Bitcoin’s price experienced fluctuations in response to recent remarks made by U.S. Federal Reserve Chair Jerome Powell. On the 18th of December, Bitcoin [BTC] slipped below the $100,000 threshold following Powell’s statements during a press conference.
During the conference, Powell made it clear that the Federal Reserve is prohibited from holding Bitcoin and has no intentions of pursuing a change in legislation to enable such holdings. In response to queries regarding a potential Bitcoin reserve for the U.S. government, Powell unequivocally stated,
“We have no plans to change the existing laws.”
As of the latest update, Bitcoin was trading at $101,292, marking a 2.01% decline over the past 24 hours and a 0.18% decrease over the week.
Market Uncertainty Sparks by Powell’s Statements and FOMC Projections
Powell’s statements and the Federal Open Market Committee’s (FOMC) revised rate cut projections for 2025 had a negative impact on the overall cryptocurrency market sentiment.
The announcement of a reduction in the number of expected rate cuts for 2025 compared to previous projections led to a sense of unease in both the crypto and stock markets. This resulted in widespread selling activity, as noted by Santiment.
Altcoins suffered the most, with Avalanche, Chainlink, and Litecoin all witnessing a 16% drop, while Pepe plummeted by 17% in the last 24 hours. Ethereum [ETH] experienced a 6% decline, and XRP saw a 10% dip. Bitcoin’s drop below $100,000 acted as a bearish signal, intensifying negative market sentiment.
Analysis of Bitcoin’s Critical Resistance Levels
According to crypto analyst Ali, Bitcoin seemed to have broken out of a head-and-shoulders pattern, indicating a potential bearish target of $99,000. However, Ali emphasized the importance of surpassing the $105,400 mark to invalidate the bearish scenario.
The ongoing price movements suggest that market participants are closely monitoring these critical levels for further confirmation.
Despite prevailing bearish sentiments, there is ongoing activity in the market. Data from IntoTheBlock revealed that large Bitcoin transactions exceeding $100,000 have remained consistently high throughout the year. The surge in whale activity to a seven-day high of 926.53K BTC on December 16th reflects sustained institutional interest.
Market Trends: Trading Volume, Open Interest, and Netflows
Coinglass data illustrated a notable 39.05% surge in trading volumes, reaching $150.01 billion, indicative of increased market activity. However, open interest experienced a slight decline of 1.10%, standing at $67.77 billion.
Options markets witnessed a rise, with options volume climbing by 33.15% to $4.28 billion, while open interest in options observed a marginal uptick of 0.84%, reaching $41.68 billion.
Exchange netflows data pointed towards robust accumulation trends. In 2024, BTC outflows dominated, with a consistent display of red bars signifying reduced selling pressure. On December 19th, net outflows of $43.3 million suggested traders were moving BTC into cold storage, reflecting their confidence in the asset.
The overall cryptocurrency market capitalization declined by 5% to $3.44 trillion, with trading volumes surging by 40% to $251 billion. These combined insights indicate that despite challenges faced by Bitcoin and the broader market, traders are actively positioning themselves for potential market shifts.